The Hokey Pokey, a children's day care center is thinking about changing the nature of its business. It is considering shutting down the day care center, and re-opening their business as an adult night club called the Hanky Panky. The Hokey Pokey currently makes $500 in profits. However, re-opening as the Hanky Panky will increase their profits from $500 to $1500. Friendly's Ice Cream which is currently located next to the Hokey Pokey is concerned because this move would reduce its profits by $1200. This would occur because they lose many of the families who currently come to the restaurant (some of which have their kids in the day care center.) but very few adult night club patrons are looking for ice cream. If no significant bargaining costs exists, does economic theory predict that the efficient outcome will still occur? A) Yes, the Hokey Pokey will change to the Hanky Panky because this gives them the highest profit. B) No, the Hokey Pokey will change to the Hanky Panky because this gives them the highest profit. C) No, the Hokey Pokey will stay the Hokey Pokey because it is the socially correct thing to do. D) Yes, the Hokey Pokey will stay the Hokey Pokey because Friendly's will pay them to stay that way.
The Hokey Pokey, a children's day care center is thinking about changing the nature of its business. It is considering shutting down the day care center, and re-opening their business as an adult night club called the Hanky Panky. The Hokey Pokey currently makes $500 in profits. However, re-opening as the Hanky Panky will increase their profits from $500 to $1500. Friendly's Ice Cream which is currently located next to the Hokey Pokey is concerned because this move would reduce its profits by $1200. This would occur because they lose many of the families who currently come to the restaurant (some of which have their kids in the day care center.) but very few adult night club patrons are looking for ice cream.
If no significant bargaining costs exists, does economic theory predict that the efficient outcome will still occur?
|
|
|
||
|
|
|
||
|
|
|
||
|
|
|
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
Unlock instant AI solutions
Tap the button
to generate a solution
